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Friday, February 22, 2013

Mayor Greg Ballard and Citizens Energy folks promised Indianapolis residents that Citizens Energy would be able to realize huge savings from acquiring the City's water company and wastewater treatment facilities. Citizens claimed that rate increases that were projected in future years would be cut at least by 25%, if not more, at the time it acquired the utilities and threw in an additional $500 million to the City to spend on infrastructure improvements. Instead, it doubled the pay of its CEO Carey Lykins and is now petitioning the Indiana Utility Regulatory Commission to hit Indianapolis customers with a 50% increase in sewer rates and a 10% increase in water rates. Water rates just went up 25% in 2011 and sewage rates went up over 10% last year. Both rates have more than doubled over the past decade. Citizens Action Coalition representative Kerwin Olson and Councilor Zach Adamson expressed concern to the Star over the planned rate hikes:

If the Indiana Utilities Regulatory Commission approves the request, an average monthly sewer bill of $30 would rise to $40 in January and $44 in October. An average monthly water bill of $31 would rise $3 to $34. Combined, the change represents a 28 percent increase in a customer’s water and sewer bill.

Those increases are a cause for concern, according to Kerwin Olson, executive director of Citizens Action Coalition, a consumer group.

“One of the promises Lykins made was that he would be able to deliver savings to ratepayers, and the opposite seems to be happening,” Olson said.

The most recent change to the water rate was a 25 percent increase in 2011. The last sewage rate change was a 10.75 percent increase in 2012. Both of those increases were requested by the city prior to the nearly $2 billion acquisition of the city’s water and sewer departments by Citizens . . .

Specifically, the rate increases will cover $444 million in wastewater system improvements that include constructing an underground tunnel system, expanding wastewater treatment plants and continuing a septic tank elimination program. The rate increases also would help fund nearly $114 million in water system updates to prevent water main breaks, improve system flow and enhance the water treatment plants.

To critics of Mayor Greg Ballard’s decision to sell the utilities, Thursday’s announcement was proof that the deal was a bad one.

“Fundamentally, this rate increase is directly attributable to the mayor’s decision to put infrastructure repairs on the water and sewer company’s maxed out credit card to be paid by future rate increases” said Zach Adamson, an at-large city-county councilman. “He touted a short term gain, but we are living with the long term consequences.”

Marc Lotter, a spokesman for Ballard, accused Adamson’s Democratic party of leaving the sewer and water systems in poor financial shape while they controlled the city.

“It was always anticipated and discussed that rates would have to be increased because of the billions of dollars of infrastructure improvements that are needed,” he said. “Because of the mayor’s decision to partner with Citizens Energy Group, rates are going to be 25 percent lower than they would have been otherwise. We are confident Citizens is on track to meet that goal.”

Councilor Adamson's assessment that we're now paying for the $500 million Citizens paid to the City after it agreed to assume more than $1 billion in debt accumulated by the utilities at that time is spot on. A large part of that debt was incurred after the City paid more than double what the water company was worth when it purchased it from NiSource, which bought it a few years earlier, sold off profitable assets and neglected long-term maintenance needs. The City was saddled with all of those unmet needs and then foolishly turned management of the water utility over to Veolia for an exorbitant management fee. Veolia did a terrible job managing the water utility and repeatedly faced accusations by ratepayers of over billing.

My biggest criticism of the City's deal with Citizens was the purchase price it was paying. Given the incredible amount of debt the nonprofit was assuming, there was no justification for such a high purchase price other than to give the false impression there was a $500 million windfall to be gained from its sale. I knew then that Citizens could not afford to pay that price and assume all that debt unless it raised utility rates even higher than they would need to be raised if no sale had occurred. Now ratepayers are paying the price for that $500 million imaginary windfall. See children, there really is no such a thing as a free lunch despite what Mayor Ballard promised you when he unveiled the deal in 2009.

5 comments:

The city's stance is someone who sold a broken down house for full price and then wants to blame previous owners for the condition. The condition is not the point, it is the amount of money that they choose to grab in the transfer, all so Mayor Ballard could fatten the wallets of his buddies. The city extorted a $425 million dollar payment from citizens as part of transferring control to that non-profit.

In return for that $245 million, they handed control of a monopoly over to yet another non-profit that is run to maximize the amount of salary paid to its board.

I think that the current city administration is somehow the sleaziest, most corrupt, and incompetent group that Indianapolis has ever had, and that the actions of this group will leave Indianapolis more destitute than Detroit.

A long time, in the novel Paper Moon, the con-man talked about never leaving a mark completely broke, you wanted to leave him enough money so he could recover, and be taken again. The powers to be that are too greedy to follow that advice.

The $425 million figure often quoted by the Star and Ballard wasn't even correct. Lykins corrected Ballard in the middle of a news conference to say it was $263 million.

Regardless the City got $263 million that Ballard and the Star lauded as money from heaven. In reality it was walking-away money; when a poor person sells their house to a shady real estate broker, the broker will sometimes give them $300-$500 "walking away money", in cash, at closing. The broker couches this as a goodwill gesture to make sure the now-homeless person can rent a truck or pay final utilities. In reality such a payment is made to make it more likely the seller gets their furniture and crap out of the house.

In this case the $263 million is often mentioned, but not the larger amounts - the hidden tax increases to cover the cost of modernization. Now these costs are coming to light.

For you attorneys, check out state law on ownership and transference of a city sewer system...it will make your head explode, what they did.

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